Monday, April 27, 2009

Equal marginal sacrifice (where each gives up the same utility from the last unit of income): It is often used to justify progressive taxation. The idea is to examine what a person gives up when the last dollar of taxes is paid. To pay the last $50 in taxes, a low-income person might have to give up something essential, such as a pair of shoes. A high-income person might give up a luxury of little practical value or necessity. Accordingly, taxes should be increased on the high-income person and reduced on the low-income person until both sacrifice equally when the last dollar of taxes is paid.

Now, of course, if we really put the principle into operation, the wealthy would pay a helluva lot more in income tax. But it does explain the notion that wealthier individuals can be expected to pay at a higher rate on the top part of their income – remember progressive income tax rates are only applied to marginal income; you don’t pay the same rate on the last dollar of income as you do the first.

But La Plante thinks this is SO UNFAIR (never mind that the people with the top incomes keep earning a larger and larger percentage of the total income in the country). He’s in favor of the flat tax because it will stop the oppression of the wealthy:

Placing extraordinary taxes on high-income earners is bad for another reason: That fuels majoritarian impulses that imperil our political system. The majority rules, but our national and political institutions do have checks on majority rule, including the U.S. Bill of Rights. These checks are useful—it's a fact of human existence that small groups of people are vulnerable to rough treatment at the hands of the majority.

Indeed, our political history has been marred by majoritarian excesses, including vigilante justice, lynchings, wartime internment of American citizens and, at our worst, slavery.

If that doesn’t make you proponents of the progressive income tax hang your heads in shame, Spot doesn’t know what will. That extra one percent on incomes over a quarter of a million a year, yeah, that’s so much like lynching and slavery it’s scary! What are we coming to as a society?

John says, after all, life is “regressive.” We have another name for that, John; it’s called Social Darwinism.